Victoria's Secret faces fresh activist fight from Barington Capital, source says

Activist hedge fund Barington Capital Group, holding over 1% of Victoria's Secret, plans to push for board changes and the termination of the company's shareholder rights plan, citing significant underperformance since its 2021 spin-off and a 55% stock decline this year. Barington believes the current board lacks sufficient experience to revitalize the brand and wants the company to refocus on core initiatives and accelerate digital and international growth; the fund also sees potential value in the company's beauty business. Victoria's Secret has acknowledged Barington's position and stated they are looking forward to discussing their views.

Analysis

Activist investor Barington Capital Group, holding over 1% of Victoria’s Secret & Co. (VSCO), is preparing to advocate for substantial changes, including a board overhaul and the rescission of a recently implemented shareholder rights plan. This initiative is driven by Barington's view that VSCO has significantly underperformed competitors and experienced considerable value destruction since its 2021 spin-off from L Brands, highlighted by a 55% share price decline year-to-date and a current market capitalization of approximately $1.45 billion. Barington specifically cites concerns regarding the public company experience of CEO Hillary Super, appointed in September 2024, and the current board's capacity to rejuvenate the brand. The activist fund proposes a strategic refocus on core products like bras and the 'Angels' campaign, coupled with accelerated expansion in digital and international markets. Furthermore, Barington identifies VSCO's beauty segment as a potentially undervalued asset, possibly worth the company's entire market value. Victoria’s Secret has indicated it has not yet been directly contacted by Barington but is open to discussions, expressing confidence in its existing strategy and leadership. The contested shareholder rights plan was adopted in May, reportedly as a defensive measure against BBRC International Private Limited's increased stake of around 13%. Barington, founded by James Mitarotonda, has a history of activism, including at L Brands (VSCO's former parent), Macy's, and Hanesbrands, though it recently lost a board challenge at Matthews International.

Key Decisions for Investors

• Investors should closely monitor the developments of Barington Capital's activist campaign, as its progression could lead to significant strategic re-evaluations and board changes at Victoria's Secret, carrying both potential for value unlock and heightened share price volatility.
• Given the 55% year-to-date stock depreciation and Barington's pointed criticisms regarding leadership and strategic execution, a thorough reassessment of Victoria's Secret's turnaround viability and associated risks is warranted.
• The response of Victoria's Secret's board to Barington's demands, particularly concerning the shareholder rights plan and board composition, will be a crucial determinant of the engagement's duration and outcome, significantly influencing shareholder returns.
• The potential standalone valuation of Victoria's Secret's beauty division, as emphasized by Barington, should be a key consideration in assessing the company's intrinsic value and the financial implications of any future restructuring or strategic focus on this segment.